MIDAS SHARE TIPS: Here’s a remedy to perk up your portfolio – Haleon

In 2016, a group of more than 2,000 American men and women ages 65 and older agreed to take part in a trial to see if vitamin pills would make their brains work better.

For three years, half of the volunteers took Centrum Silver, a supplement for the over-50s, and the other half took a placebo. The results were convincing. Centrum Zilver helped seniors to remember better, to solve problems faster and to reason better.

Released late last year, the news was particularly welcome HALEONthe consumer health group, which spun off from drug giant GSK in the summer of 2022. Haleon focuses on what could be called the serious side of everyday health.

The over-the-counter remedies include pain relief, such as Panadol and Voltaren, cold and flu medications such as Day Nurse, Night Nurse, and Otrivin, Tums for indigestion, even Nicorette gum for smokers, and ChapStick for those with dry lips. It also makes Polident for dentures and Sensodyne for sensitive teeth, the world’s second largest toothpaste brand after Colgate.

Then there are the supplements, including Caltrate, a calcium tablet, and Centrum, whose vitamin blends help insomnia, muscle pain, vision, and more.

Haleon is one of a kind – the only publicly traded company dedicated solely to consumer health. Shares have performed moderately since the GSK split and are now £3.30, a price that reflects neither current performance nor future prospects.

Looking ahead, the stock should pick up as the company proves its mettle, free of its pharmaceutical parent.

Haleon is big. The group is valued on the stock market at almost £30 billion, has 23,000 employees and its products are sold all over the world. Some brands are global, including Sensodyne, Panadol and the nasal spray Otrivin. Some are more popular in certain parts of the world than others. For example, caltrate used to be given out for free in China because calcium deficiency is such a big problem there, and even now the government is running programs to encourage citizens to take it.

Many brands go under different names in different places. Corsodyl mouthwash here is known as Parodontax in most other countries. Ibuprofen drug Advil is big in America but less known here.

However, across the company, Haleon prides itself on taking a therapeutic approach to healthcare: making things designed to help users feel stronger and healthier than they otherwise would. Chief executive Brian McNamara spends around £300 million – 3 per cent of sales – on research and development every year, not only to ensure that Haleon products do what they say on the tin, but also to ensure that the company stays abreast of trends and tastes.

This could mean new formulations, chewables instead of pills, new blends, toothpaste that helps bleeding gums and reduces sensitivity, and recyclable packaging instead of heavy cans.

The company also works hard to build relationships with dentists and pharmacists so that they recommend Haleon products to their patients. Most are also sold in supermarkets, but professional recommendations can give Haleon’s products an edge. And in many parts of the world, including mainland Europe, even headache pills are only sold through drugstores.

Haleon will report its first full-year earnings as an independent company next month, but McNamara has already told investors that trading in the first nine months of last year was better than expected. Analysts expect revenue to rise 15 per cent to £10.9bn for 2022, with profits up 5 per cent to £2.3bn and a dividend of 3p, doubling to 6p this year.

Some followers worry that Haleon will be hit by the cost-of-living crisis, with consumers turning to cheaper alternatives, such as supermarkets’ own-brand drugs. Evidence to date suggests otherwise and sales have been little affected by past recessions. When it comes to health, consumers are often willing to pay, especially if they are buying for sick children or elderly parents. And many of us are remarkably loyal to the brands we grew up with. Tums, for example, was launched more than 60 years ago and is still going strong.

Aside from economic concerns, Haleon stock has also been devastated by a lawsuit related to Zantac, the GSK antacid, with fears the legal action could hit Haleon. However, in December last year, a US judge dismissed thousands of cases for lack of evidence.

Midas verdict: Consumers around the world are spending more on their health as populations age and emerging markets get richer. Haleon is well positioned to benefit from a stable of well-known brands, trusted from Beijing to Birmingham. At £3.30 the shares are a buy and the dividend offers some extra income too.

Traded on: Main market Ticker: HLN Contact: haleon.com or 01932 822 000